Israel Among World’s Most Competitive Economies

Israel moved up eight notches to rank 15th worldwide in the World Economic Forum’s Global Competitiveness Index for 2006-2007, establishing it as one of the world’s most competitive economies.

The economy’s most significant achievements, according to the survey, were concentrated in the areas of technological readiness (up 20 places to No. 3), macroeconomic management, market efficiency, and various areas of infrastructure. Improvement also came from significant policy reforms coupled with fiscal discipline, which the report said had introduced a greater degree of competition.

“The area that saw the most impressive developments was the financial market, highly developed by regional and international standards,” said Augusto Lopez Claros, chief economist and head of the Global Competitive Network at the forum.

“More importantly, Israel has benefited from the development of a culture of innovation, supported by first-class institutions of higher education and scientific research. Israel has become a world technology powerhouse, and this is beginning to have a favorable demonstration effect on the rest of the economy, an excellent omen for the future,” he said.

Israel’s move came even as US economic competitiveness fell significantly as high budget and trade deficits combined with low health and education standards to worsen America’s business environment.

The poor response to Hurricane Katrina, government corruption and a decreasing talent pool due to immigration restrictions were other factors cited by the forum, which moved the US to sixth from the top spot a year ago.

“While strengths in the technological and market efficiency sectors explain the country’s overall high rank, the US economy suffers from striking weaknesses,” the report said. “There is significant risk to both the country’s overall competitiveness and, given the relative size of the US, the future of the global economy.”

Switzerland topped the poll, which was conducted for the 27th consecutive year, but only the second year using a new formula, the forum said.

More than 11,000 business leaders in 125 countries took part in the survey, which found that the Alpine nation’s sound institutional environment, excellent infrastructure, efficient markets and high levels of innovation made it the world’s most competitive business environment.

“The country has a well developed infrastructure for scientific research, companies spend generously on [research and development], intellectual property protection is strong and the country’s public institutions are transparent and stable,” the forum said.

Nordic countries – traditionally strong in the survey – took the next three places, with Finland, Sweden and Denmark all praised for running budget surpluses and having low levels of public debt. The forum also lauded the high quality of education and social services in these countries.

Rounding out the top 10 were Singapore, Japan, Germany, the Netherlands and Britain.

The aim of the survey, the forum says, is to examine the range of factors that can affect an economy’s business environment and development as it seeks to maintain economic growth – including the levels of judicial independence, protection of property rights, government favoritism in policy-making, and corruption.

Emerging economies such as China and India fared modestly.

India came in at 43rd, carried by its high innovation and the sophistication of firm operations. Poor health services, education and public infrastructure held the country back, however, as fewer people enjoy the benefits of the country’s robust growth rates. The government also has failed to reduce its public sector deficit, one of the highest in the world.

China dropped six places from last year to 54th. While it has high savings rates and an excellent macroeconomic outlook, the country’s state-controlled banking sector and low penetration rates for new technologies need attention, the forum said. Education and environment are other significant weaknesses.

At the bottom of the list were countries primarily in sub-Saharan Africa: Burkina Faso, Malawi, Mali, Zimbabwe, Ethiopia, Mozambique, East Timor, Chad, Burundi and Angola.